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Ramalingam Kalirajan |10874 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Aug 02, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Question by Santhosh on Jul 26, 2025Hindi

Sirs, kindly advise on SBI Life Retire smart Plus, Is it worth this pension plan

Ans: . You are thinking in the right direction.

SBI Life Retire Smart Plus is a pension ULIP product. It is an insurance-cum-investment product. Your question is valid. Let us understand the product from all sides.

Here is the detailed, clear, and complete assessment.

» Understand the Nature of the Product

– This plan is a ULIP-based retirement product.
– It invests in equity, debt, and balanced funds.
– It offers a pension on vesting age.
– It promises a retirement corpus and lifelong annuity.

» Know the Real Structure Behind the Scenes

– It mixes insurance with investment.
– You pay premium for both: fund and insurance.
– It has high allocation charges in early years.
– Fund management and mortality charges reduce growth.

» Returns May Be Lower Than Market Alternatives

– Returns are capped by annuity structure.
– Your final corpus is partly locked into annuity.
– Annuities give very low returns—around 5–6% yearly.
– This restricts your flexibility and return potential.

» You Cannot Access Full Corpus at Retirement

– On maturity, only 60% is withdrawable.
– Rest 40% is compulsorily used for annuity.
– This reduces your liquidity when you may need it.
– For emergencies, this structure can be restrictive.

» No Freedom to Choose Best Investment Options

– Funds are limited to SBI Life’s own offerings.
– You can’t switch to better outside funds.
– There’s no access to diversified AMC fund options.
– This limits long-term returns and customisation.

» Compare This to Mutual Fund Retirement Planning

– In mutual funds, you control withdrawal timing.
– No compulsion to buy annuity with 40% corpus.
– You can choose high-quality actively managed funds.
– Regular investments can build a better corpus.

» Drawbacks of Annuities Used in Such Plans

– Annuities have very low post-tax returns.
– No inflation protection is built-in.
– Most options don’t give back corpus after death.
– Flexibility in income flow is missing.

» Pension ULIPs Like This Are Not Ideal for Retirement

– Lock-in period of 10 years or till age 60.
– Limited transparency on fund performance.
– Surrender charges can be high in early years.
– Lower liquidity compared to mutual funds.

» Better to Separate Insurance and Investment

– Take term life insurance for protection.
– Invest in good regular mutual funds via SIP.
– Use MFDs with CFP credentials for fund selection.
– This gives better growth and peace of mind.

» Regular Mutual Funds Over Direct Mutual Funds

– Direct funds lack expert monitoring.
– Without MFD/CFP help, poor fund selection is common.
– No personalised rebalancing or goal review is possible.
– Regular plans via MFDs offer ongoing guidance.

» Active Funds Over Index Funds for Retirement

– Index funds just copy the index, no selection.
– Actively managed funds can beat the index.
– A skilled fund manager helps in downside protection.
– Retirement needs active growth, not passive returns.

» Fund Performance in Retire Smart Plus

– Historically underperformed many active equity funds.
– Limited fund options compared to mutual fund universe.
– High fees eat into compounding benefits.
– Performance data is not as transparent as MF.

» Lock-in and Exit Restrictions

– Even after maturity, you must buy annuity.
– This means your money never comes fully free.
– Flexibility of using corpus as per need is gone.
– Unplanned expenses become hard to manage.

» Tax Benefit May Not Be Worth the Trade-off

– You get 80CCC tax deduction.
– But total 80C limit is shared with EPF, PPF.
– Post-retirement income from annuity is fully taxable.
– So net benefit becomes marginal in long run.

» Insurance Cover Offered Is Minimal

– It is only fund value-based.
– Not sufficient for actual protection needs.
– Better to go for term plan separately.
– ULIP insurance cover is a false sense of safety.

» Surrender Terms Are Not Very Friendly

– High surrender charges in early years.
– Only NAV is paid, no loyalty additions.
– Exit before 5 years puts money in discontinuance fund.
– You lose control and may get poor returns.

» Other Practical Issues to Consider

– Nomination, annuity choice, returns handling is complex.
– Online interface and tracking is not seamless.
– Servicing issues have been reported in some cases.
– Maturity processing can also take time.

» Use Goal-Based Retirement Mutual Fund Planning Instead

– Choose retirement as a goal and plan SIPs.
– Rebalance annually with help of MFD + CFP.
– Stay invested through active funds for 10–15 years.
– Then start a Systematic Withdrawal Plan for monthly income.

» Power of SIP in Regular Actively Managed Mutual Funds

– You can start even with Rs. 5,000 monthly.
– Funds grow tax-efficiently.
– Liquidity is better and accessible.
– Better compounding, lower cost, more control.

» Asset Allocation Is Easier and More Personalised

– You can mix debt and equity.
– You can do step-up SIPs as income increases.
– You can withdraw partially for other needs.
– No penalty or charges for exit after 1 year.

» Role of EPF and Gold in Your Retirement Planning

– EPF gives assured returns with tax benefits.
– Gold is good as a hedge, not as main plan.
– Gold doesn’t give regular income post-retirement.
– EPF and mutual funds work well together.

» Better Control on Withdrawals in Mutual Funds

– You decide when and how much to withdraw.
– No forced annuity purchase needed.
– Tax is payable only on gains, not full amount.
– Withdrawals can be customised for expenses or gifts.

» What You Should Do Next

– Avoid ULIP pension plans like Retire Smart Plus.
– Don’t buy insurance-linked investment products.
– Use MFD + CFP support for better fund selection.
– Build SIP in regular, actively managed mutual funds.

» Finally

– Retire Smart Plus offers limited returns and flexibility.
– It ties your hands with annuity at the end.
– Insurance inside the plan is weak and not helpful.
– You have better options with term plan and SIPs.
– Stay in control of your retirement money always.
– Use tax-smart and growth-friendly mutual fund strategies.
– Plan your retirement with active investing, not locked plans.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.